New SSS provident fund to boost retirement savings

MANILA, Philippines — Filipinos will soon get the opportunity to raise their retirement savings through a provident fund which will be established by the Social Security System (SSS) next year, according to a top official.

In an e-mail to The STAR, SSS president and chief executive officer Aurora Ignacio said that Filipinos, under the SSS system, currently have limited retirement savings as their monthly pension depend on their monthly salary income.

“Pension is a product of an individual’s long-term savings. Right now, a ceiling on the monthly salary income to apply the contribution rate of SSS limits a member’s opportunity to save more for retirement,” Ignacio said.

To fix this, Ignacio said the state pension fund is planning to establish next year a provident fund, pursuant to Republic Act 11199 or the Social Security Act of 2018.

The provident fund will allow SSS members to voluntarily remit to the state fund in excess of their mandatory contributions.

Moreover, she said the Social Security Act also increased the contribution rate and the monthly salary credit (MSC), which subsequently raised the benefits that can be claimed by its members.

 “By increasing the MSC, all seven SSS benefits also increase, including pension,” Ignacio said.

Starting April this year, the premium contribution rate for SSS members was raised to 12 percent from the previous rate of 11 percent, while the minimum and maximum salary credits (MSC) of members were adjusted higher to P2,000 and P20,000, respectively.

This is pursuant to the Social Security Act of 2018, which was signed by President Duterte in February.

The law also mandated the SSS to set up a provident fund for its members, which will consist of voluntary contributions of members in excess of the prescribed SSS contribution rate of 12 percent, or the maximum monthly salary credit.

Earlier, the 2019 Melbourne Mercer Global Pension Index said the Philippines has the fourth worst retirement system among 37 countries across the globe, with an overall index value of 43.7.

This was the Philippines’ first time to be included in the MMGPI study, which is now on its 11th year.

Mercer said the 2019 index calculates the net replacement rate, which refers to the level of retirement income provided to replace the previous level of employment earnings.

 “We welcome the results of the Global Pension Index as it puts retirement at the forefront of social issues today. Since this is the first time that the Philippines was included in the study, it highlights the need for urgency of actions to prioritize social security protection for all Filipinos,” Ignacio said when asked to comment on the study.

However, Ignacio also defended the SSS, saying the state pension fund has been managed well.